Brexit boosts Luxembourg's real estate prospects

The city for the first time entered the ranks of the most attractive cities in Europe, claiming ninth spot in an annual real estate forecast published jointly by the Urban Land Institute and PwC.

03.11.2017

Luxembourg
has been ranked in the top 10 cities in Europe for real estate
investment and development in 2018, amid expectations it will benefit from Britain's departure from the EU.

The
city for the first time entered the ranks of the most attractive
cities in Europe, claiming ninth spot in an annual real estate
forecast published jointly by the Urban Land Institute and PwC.

Brexit underpinned Luxembourg's place in the rankings, according to the report, which is based on a survey of 800 real estate professionals in Europe.

“We
see Luxembourg as a very attractive alternative for London. You can
already see increasing construction activity there since the Brexit
vote,” a Swiss investor said in the survey.

The
city's strong financial sector, its growing economy and major
investments in industrial sites, data centres and logistics were all
cited as positives.

However,
the report said the city is expensive to live in and there are
concerns around infrastructure capacity due to a lack of residential,
retail and schools planned to accommodate an influx of new
businesses.

Real estate investors also find it "hard to place capital" into Luxembourg and yields are low for a small market.

Yields
for the best office buildings in prime districts like Kirchberg and
Cloche d'Or stand at 4.35%, while in secondary locations in the
suburbs yields are between 5% - 6.75%.

The
Grand-Duchy's capital was also ranked fourth overall for an expected
increase in rents and capital values in 2018.

London, on the other hand, was expected to see a fall in values on both counts and was ranked 27th overall.

“There
is not a lot of tangible evidence of Brexit’s impact on the markets
we play in – except in Luxembourg,” said the head of real estate
at a European insurance group.

German
cities remained at the top of the list, with Berlin claiming top spot
for the fourth year in a row. Frankfurt and Copenhagen were tied for
second.

Munich,
Madrid, Hamburg, Dublin and Stockholm were all ranked above
Luxembourg, while Amsterdam came in just below in the tenth spot.